Frequently Asked Questions
How much should I save for retirement?
Standard advice: 15% of income starting at age 25. Later starters need more: age 30 = 18%, age 35 = 23%, age 40 = 28%. If you have pension or expect significant Social Security, you can save less. If you want early retirement, you'll need to save 30-50%+ of income.
What if I'm behind on retirement savings?
Don't panic—do something. Options: 1) Increase savings rate dramatically (max all accounts), 2) Delay retirement (even 2-3 years helps significantly), 3) Plan for part-time work in early retirement, 4) Reduce retirement spending expectations, 5) Downsize home, 6) Move to lower cost-of-living area. Small changes compound.
When should I start taking Social Security?
Full retirement age is 67 for those born 1960+. You can start at 62 (reduced benefit) or delay until 70 (increased benefit). Generally, if you expect to live past ~80, delaying is better. If you need income now or have health issues, earlier may make sense. Spousal strategies matter too.
Should I pay off debt or save for retirement?
High-interest debt (credit cards): Pay off first. Low-interest debt (mortgage 3-4%): Save for retirement while paying minimum—historically investments return more than mortgage costs. Student loans: Depends on rate, but don't skip employer match to pay loans faster. Never leave free money on the table.
What about healthcare in retirement?
Medicare starts at 65 but doesn't cover everything (deductibles, copays, dental, vision, hearing). Budget $5,000-10,000/year per person for healthcare. Consider Medigap or Medicare Advantage. Long-term care (nursing home): $100k+/year—consider LTC insurance in your 50s if family history suggests need.
Can I retire early?
Yes, but requires aggressive saving: 30-50% of income or more. Need enough to cover longer retirement (potentially 40+ years). Healthcare is challenge before Medicare at 65. Consider: 1) Build substantial taxable account for bridge years, 2) Roth conversions for ACA subsidies, 3) Part-time work for insurance, 4) Geographic arbitrage (lower cost countries/areas).
What if the market crashes right before I retire?
This is "sequence of returns risk." Mitigate by: 1) Having 2-5 years of expenses in bonds/cash (not stocks), 2) Flexible spending plan (reduce withdrawals in down years), 3) Working part-time temporarily, 4) Annuitizing some savings for guaranteed income. Start reducing stock allocation 5-10 years before retirement.
Should I use Roth or Traditional 401k/IRA?
Traditional if current tax rate > expected retirement rate (deduction now, pay tax later). Roth if current rate < expected rate (pay tax now, grow tax-free). Many do both for flexibility. In low-income years (job loss, early retirement before RMDs), convert Traditional to Roth at low tax rates.
How do I know if I'm on track?
By age 30: 1x annual salary saved. Age 40: 3x. Age 50: 6x. Age 60: 8x. These are rough guides—your needs may vary. Better: Calculate your specific needs using this calculator annually. Adjust contributions based on progress. Catch up in high-income years.
What about required minimum distributions (RMDs)?
At age 73 (75 starting 2033), you must withdraw ~3.65% from Traditional 401k/IRA, increasing % each year. Forces taxable income. Plan for this—consider Roth conversions before RMD age, especially if you'll have high RMDs that push you into higher tax brackets. Roth IRAs have no RMDs during your lifetime.
Should I work with a financial advisor?
Consider if: 1) Complex situation (business, inheritance, divorce), 2) Within 5-10 years of retirement, 3) Need accountability, 4) Don't want to manage investments yourself. Look for fee-only fiduciary advisors (not commission-based). DIY is fine for many—use target-date funds or simple 3-fund portfolio.
What if I outlive my savings?
Prevent this: 1) Use conservative withdrawal rate (3-4%), 2) Consider single premium immediate annuity for guaranteed lifetime income, 3) Delay Social Security for higher benefit, 4) Maintain flexible spending plan, 5) Keep options for part-time work, 6) Have paid-off home as backup (reverse mortgage if needed). Plan for 90+ lifespan.